[290511.EN.SEA] Cosco Faces Loss Of $1bn Rig Contract From Sevan

Singapore: Shipbuilder Cosco Corp could suffer from a $1.05bn loss of contract to build two oil rigs from its customer Sevan Marine, which is currently facing severe financial difficulties.

The Norwegian oil services group Sevan Marine said on Thursday it had cancelled its planned $275m rights issue and was seeking restructuring as it could not meet its project liquidity and financing requirements.

Singapore-listed Cosco Corp had in March signed an agreement to build two rigs for Sevan Marine's unit Sevan Drilling. Jan Erik Tveteraas, ceo of Sevan Marine, has also resigned “for personal reasons”, the company said.

Sevan Drilling has one rig currently under construction at Cosco's yard as well as a letter of intent for two rigs plus option for two additional rigs. Cosco could be affected by Sevan Drilling's inability to continue with $172m of financing needed within a year's time for the construction of the rig Sevan Brasil, according to JP Morgan.

Sevan Drilling would also find it hard to fund the remaining 80% for the contract of the two rigs and not likely to exercise the option. Sevan Drilling currently accounts for 8% of Cosco's current orderbook. Including the new contracts for the two rigs, Sevan Drilling would account for 20-22% of Cosco's orderbook.

Source : STA Online, 27.05.11.